What Happens if I Don't Get a Compensation Agreement in Writing?

What Happens if I Don't Get a Compensation Agreement in Writing?

Posted By
Mahir Nisar Attorney at Law

When it comes to any type of business contract, it is always best to get
it in writing. New York, like many states, has a Statute of Frauds, which specifies when agreements must be in writing to be enforceable
in court. For example, a “contract to pay compensation for services
rendered” in negotiating the sale of a business or any related assets
must be in writing. This means if you agree to sell merchandise on commission,
you must have a written contract to enforce your rights in court.

Yarusi v. S. Sedghi Incorporated

A written contract does not necessarily mean a single document. Several
writings taken together may prove the existence of a valid contract. What
a court looks for is that all “essential terms” are in writing
and subscribed to by all parties.

It can still be difficult, however, to prove a contract without a single,
integrated document. Here is a recent example from a federal case pending
before a federal judge in Manhattan. The plaintiff in this case worked
as an “independent sales representative” for a clothing manufacturer.
Specifically, she arranged sales of the manufacturer's products to
a large national retailer. In exchange, the the plaintiff said she received
a 2.5% commission on each sale.

The manufacturer unilaterally terminated the plaintiff's services in
August 2013 and ceased paying commissions as of December 2013. The plaintiff
argued she was still entitled to commissions earned on sales that she
arranged but were not completed until early 2014. The manufacturer refused
to pay, and the plaintiff subsequently sued for breach of contract.

But as U.S. District Judge Naomi Reice Buchwald held in an
August 13 decision, the plaintiff's “complaint fails to satisfy New York's
Statute of Frauds.” The plaintiff never presented a single, written
contract with the manufacturer. Instead, she offered three other types
of evidence: first, the written termination letter she received, which
referred to her “agreed upon commission” for sales to the
retailer; second, copies of shipping statements from the manufacturer
to the retailer, which included line items for commissions paid to the
plaintiff; and finally, copies of the commission checks the plaintiff
actually received.

All of this did not add up to proof of a contract, Judge Buchwald concluded,
at least far as the Statute of Frauds was concerned, because “the
writings fail to indicate the scope of the agreement.” None of the
documents provided by the plaintiff established her actual job responsibilities,
her rate of commission or the duration of the agreement. At best, Judge
Buchwald said the plaintiff's termination letter indicated her employment
was “at will,” which in and of itself does not contain a “duration
term,” a necessary element of a contract.

That said, Judge Buchwald did not dismiss the plaintiff's lawsuit in
its entirety, only her breach of contract claim. The judge found the plaintiff's
documentary evidence was sufficient to pursue a claim for restitution
based on the manufacturer's alleged “unjust enrichment”;
that is, the plaintiff performed services for the defendant “and
that neither she nor defendant regarded those services as gratuitous.”
This claim remains pending before the court.

Need Help With a Breach of Contract Claim?

As the above case illustrates, written contracts offer the best protection
for parties if and when the business relationship sours. And while it
is not impossible to recover when a party has breached an unwritten agreement,
it is certainly more difficult to do so. In any event, you should not
try to resolve a contractual dispute of any sort without the assistance
of an experienced New York civil litigation attorney.
Contact our offices
today if you would like to speak with someone immediately.